Winter is usually the time when energy resilience is under the greatest threat and power disruptions are most likely to impact business operations. In this blog, we consider the outlook for the next three months’ UK electricity supply, how companies can mitigate the impact of energy price volatility, and look forward to 2026 – and beyond – with greater confidence in their energy security and efficiency.
A positive outlook
The good news for January and the remaining winter months is that the UK has a more secure energy supply than we’ve seen in recent years. That said, there are still going to be ‘tight days’ and, with electricity pricing still linked to gas, cost volatility may impact businesses’ bottom line. The Winter Outlook from National Energy System Operator (NESO), which runs up to the end of March, forecasts a derated electricity margin of 6.1GW of the Average Cold Spell (ACS) peak demand – an increase from 5.2GW (8.8% of peak demand) from last winter and the highest derated margin since 2019/20[1]. And the Loss of Load Expectation (LOLE) is forecast at 0.1 hours / year, where LOLE of three hours per year represents the UK’s reliability standard to ensure security of electricity supply. This is the point at which supply is anticipated as being lower than demand under normal system operation, and where action is required to meet predicted shortfall.
In DESNZ’s Statutory security of supply report: 2025, published mid-December, there is strong emphasis on the importance of energy storage to harness the growth in renewables as part of the UK’s shift to clean power and increased electrification[2]. The significant increase in margin for electricity security this winter can be attributed to the growth in battery storage, and to the latest Greenlink interconnector to Ireland, operational since last year. However, given the decline in domestic gas production and the changing supply mix – with increased emphasis on import and the declining UK Continental Shelf supply – gas margins are tighter than they have been over the last four years.
During ‘tight days’, for example during “dunkelflaute” events – cold, calm, or overcast days which lead to lower wind or solar output – electricity prices will still be influenced by the gas market. As NESO note, when considering European gas storage, which is at 13% lower than 2024 and 2023 levels,
“Slightly lower European stocks heading into winter may lead to a greater requirement for liquefied natural gas (LNG) imports during a cold winter, which could affect gas and, in turn, power prices.”[4]
Decoupling gas and electricity
As long as the UK’s electricity supply remains interconnected with and reliant upon gas to balance supply and demand, international gas market fluctuations can impact UK electricity prices and put pressure on the National Grid’s capability to deliver secure power. And the question of decoupling electricity and gas prices is still ongoing.
During last June’s parliamentary debate, Decoupling Electricity and Gas Prices, Michael Shanks (then Parliamentary Under-Secretary of State for Energy Security and Net Zero) emphasised the connection between Net Zero and the international energy market and the impact of gas on UK electricity,
“Accelerating the clean energy transition away from insecure and expensive fossil fuels towards cheap, clean renewables and nuclear power will help decouple gas and electricity prices. As a result, we will reduce the exposure of consumer bills to volatile international crises…”[5]
And, on 10th December, from the Energy Security and Net Zero Committee oral evidence on the cost of energy, comes the following[6],
“Q: Why are electricity prices so variable between the UK and our European neighbours?
A: (Michael Grubb, Professor of Energy and Climate Change at University College London): There are several factors. First and foremost, the UK electricity market is more directly exposed to the cost of gas than most of the countries in Europe, which have a slightly broader mix of sources at the margin. Therefore, although the UK is now more than half of non-fossil generation, according to the estimates it is still gas that sets the price anywhere between 90% and 98% of the time. That is a key factor.”
Certainty for UK business
In the absence of rapid policy progress, UK businesses must look to their own priorities and their capabilities in addressing the issues of energy security and energy costs, especially as we become increasingly electrified. In a recent survey of 500 energy decision-makers across a breadth of sectors, including retail, industry and healthcare, 60% identified reliability as a main factor when choosing an energy contract[7].
This is in contrast to decision-makers in France and the Netherlands, where price is the most significant factor (at 70% and 68%, respectively). Arguably, this could indicate the general relevance of security and reliability to the UK as compared to European countries, where the link between gas and electricity markets does not appear to create the same level of commercial uncertainty. That said, in the same survey, the main energy goals for 2026 were identified as reducing costs (49%), reducing energy consumption (46%) and lowering carbon emissions (36%).
Weathering this winter and beyond
While NESO and National Gas were positive in their outlook for this winter, businesses are still concerned about the potential for disruption to power supply – even the shortest brownout can have major operational ramifications – and energy spend is a persistent problem for British manufacturers. In case of local distribution network provision issues such as local weather events – including storms, gales, and localised cold snaps – and in light of the volatile energy market, modern energy management technologies can help businesses take greater control of their own security and costs. These technologies can also help address decarbonisation goals through more flexible energy usage and improved efficiency.
Battery Energy Storage Systems (BESS), are a key technology that can help businesses address all three of these pain points – security, cost, and sustainability:
Resilient, uninterruptible power: As our energy mix becomes more complex and distributed, and we move to an increasingly electrified world, the energy transition exacerbates the issue of energy security, particularly as we move to smaller-scale generation across distribution networks which places increased stress on local distribution infrastructure. Add to this the specific threats that winter poses, and the value of a BESS, when it incorporates Uninterruptible Power Supply (UPS), is evident – protecting vital equipment, processes and data even in the case of minor disruption to grid supply.
Where organisations may already incorporate UPS into their energy infrastructure to protect critical pieces of equipment, traditional UPS leaves these businesses overexposed to the uncertainties of energy prices. A traditional UPS relies on lead-acid battery technology and, while it should seldom be required it continually loses significant capacity, constantly switching between AC and DC. For a typical 1MW system, this equates to approximately £200,000 unnecessary energy spend per year. A modern BESS with UPS, however, will lose only around one percent – a significant reduction in energy loss.
Maximise on-site renewable assets: Where businesses invest in on-site renewable assets – to reduce dependence on grid supply, to lower energy spend, and / or to improve sustainability – a BESS can help maximise the flexibility of and ROI for these assets. Rather than using energy as it is generated – not necessarily the time it is most effectively deployed – a BESS allows for this energy to be stored and used when most cost-effective or operationally efficient.
Peak shaving and energy storage: As the UK’s overall energy demand increases – at any time of the year, and not limited to winter – Energy UK note that end users should
“…be encouraged and incentivised to respond to fluctuating wholesale prices, system costs, and wider market incentives to reduce their impact on the system and reduce their energy bills…”[8]
Rapidly reducing your energy consumption when demand is at its peak can help avoid punitive charges should you exceed your authorised capacity, while also helping to reduce overall demand on grid supply – contributing to reduction in the cost of high energy prices. BESS assists in achieving both these ends, without impacting production cycles.
The storage capability of a BESS enables grid supply to be purchased at its lowest price for use at peak times, helping to reduce energy spend and improve energy efficiency. And Powerstar BESS customers save an average of over nine percent on annual energy bills.
Overcoming grid constraints: Where your company may be looking to electrify processes or plant, or to futureproof as we shift towards clean power and electrification, a BESS can help overcome grid constraints – offering greater independence, without hampering innovation or growth. For a deeper dive into BESS and grid constraints, take a look at our recent blog https://powerstar.com/blog/negotiating-grid-constraints-with-battery-storage-energy-experts/
Generating additional revenue: A battery energy storage system can also offer new revenue streams to help battle rising energy costs. Through grid payback schemes, businesses can buy and sell energy back to the grid through wholesale trading and auctions. Or alternatively, earn payments by participating in Demand Side Response, while helping to stabilise the grid.
Looking to the future
Green Alliance, an independent and environmentally-focused think tank, draw a clear distinction between energy ‘independence’ and ‘security’. They highlight the size of the UK and the continuing reliance on critical raw materials (CRMs) for current and developing energy-related technologies, noting that the UK is nearly 100 percent dependent on import for the 24 CRMs which the government acknowledges to be critical, prohibiting true energy independence. Instead, they argue,
“Attempting to achieve greater energy security and affordability through diversification of supply, alongside domestic sources of energy, is likely to be more rational and achievable in an increasingly hazardous and interdependent world.”[9]
In the current context and considering a future based on energy security rather than independence, continued international relationships will be vital – regardless of whether gas and electricity prices are decoupled in the UK. For companies looking to protect their operations and budgets against future shocks and market volatility while working towards clean energy targets, modern energy management technologies can play a pivotal role.
While this winter may not bring the same energy security threats as we’ve seen in recent years due to a healthy derated electricity margin, extreme weather conditions are increasingly feasible at any time of year. And the potential for a less stressful winter might even mean that now is the time to look to and plan for the impact of climate change in the later months of the year. Despite government commitment to energy security, and ongoing and planned improvements to transmission and distribution networks and infrastructure, uncertainty makes energy resilience a critical issue for all sectors.
For more information on Powerstar’s Battery Energy Storage Systems and how we help businesses build energy resilience, visit: https://powerstar.com/landing-page/charge-ahead-with-battery-energy-storage/
[1] https://www.neso.energy/document/369621/download
[2] https://www.gov.uk/government/publications/statutory-security-of-supply-report-2025/statutory-security-of-supply-report-2025
[3] https://www.nationalgas.com/sites/default/files/documents/Gas%20Winter%20Outlook%202025.pdf
[4] https://www.neso.energy/document/369621/download
[5] https://hansard.parliament.uk/commons/2025-06-10/debates/CF211BF6-C8FA-4CA5-B83E-1D78B1D5ABF9/DecouplingElectricityAndGasPrices#:~:text=Accelerating%20the%20clean%20energy%20transition,decouple%20gas%20and%20electricity%20prices
[6] https://committees.parliament.uk/oralevidence/16902/html/
[7] https://www.sefe-energy.co.uk
[8] https://www.energy-uk.org.uk/wp-content/uploads/2025/06/Energy-UK-Powering-the-Cloud.pdf
[9] https://green-alliance.org.uk/publication/uk-energy-security-the-benefits-of-diversification/
